£50 000 In Debt On Credit Cards And Other Debts?

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A debt of £50 000 is significant. Whether it is loan or credit card derived. If you are struggling to pay it back, it may be a very stressful time dealing with constant communication from lenders or struggling to pay your rent and bills.

Furthermore, some debt solutions, such as a Debt Relief Order will not be available to you due to your debt's size. The good news is other options are available to help you come out of your 50 000 debt, and we will share them with you on this page.

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The Challenge of Managing £50 000 of Debts

A debt pile of £50,000 is substantial irrespective of how it splits; whether unsecured fixed-term loans or credit card debt, the monthly repayments will be significant and to manage it you need to be very well organised. If you can only pay back the minimum monthly payment, your debts will increase in size due to the high rate of interest.

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50 000 in debt on credit cards

Unsecured personal loans, such as student loans usually have interest rates of under 10%. However, credit card debt attracts a significantly higher interest rate, and the equivalent APR can be incredibly high. If you owe the majority of all your balances on credit card debt, retaining control of your finances will be even more challenging.

My Debt Is Out of Control – How Do I Get Rid of 50K Debt?

When you are 50 000 in debt, it is not a surprise if you are struggling to keep your head above water. At this stage, it is vital to use a money advice service like the National Debt Helpline, Citizens Advice, any other credit counselling agency, or a reputable debt management company.

They will be able to guide you in various ways, including:

  • Suggesting ways of managing your credit card and loan debts through an appropriate debt solution.
  • Offering you solid advice on ways to manage your finances so you can become debt free.
  • Help you to feel a little better about your situation by talking to you in a non-judgemental way.
  • Ensuring that you know everything is discussed in confidence, so you do not have to hold back on crucial information.

If I am In Debt Can Money Management Strategies Help Me?

Two options are proven to work in reducing your borrowing and get your finances back under control.

The snowball method:

As a money management strategy, the snowball helps you pay off your debts faster and works by paying off the smallest debts working up to paying off the most considerable account balance.

It is a technique that you can apply in three easy steps:

  1. 1
    Make the minimum payment on all your loan and credit cards next month.
  2. 2
    If you have any surplus money use it to pay off the lender where you have the smallest balance.
  3. 3
    Once the smallest balance has been repaid, next put your surplus funds towards paying off the next smallest balance and so on until all your debts are repaid.

The avalanche method:

Also known as debt stacking, the avalanche method is an elimination strategy and works differently to the snowball method. Instead of paying off your debts in order of the balance size, you pay off the balance that incurs the highest interest rate.

It is a simple method and works using the following steps:

  1. 1
    Make a minimum payment across all your outstanding loan and credit card balances.
  2. 2
    Put any surplus money you have into the account attached to the highest interest rates which can be significant with credit card debt.
  3. 3
    Once you have paid off the balance associated with the highest interest rate, move on to the interest rate next in line until you have cleared all your loan and credit card debt.

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Debt Solutions to Help Manage Your Debt

If you have tried money management techniques, but they have not helped your circumstances, you will need to move forward and consider a debt solution. Guidance from a proficient debt adviser will be essential to ensure the right solution for your circumstances. Realistically there are probably four options available to you due to the large size of a £50k debt that we will now consider.

Individual Voluntary Arrangements (IVAs)

An Individual Voluntary Arrangement (IVA) is a legally binding agreement set out in a court of law where a debtor commits to make a monthly payment for five years into a plan distributed to creditors.

An IVA is set up and administered by an Insolvency Practitioner or IP. The way an IVA works is the IP will put together a proposal that includes a Statement of Affairs that outlines assets, personal finance, and your income. The IP presents the proposal to your lenders, such as loan and credit card providers and lists how much you can afford to repay of your outstanding accounts each month.

Creditors may accept as little as 25% or 30% of the total owed and for the IVA to be accepted at least 75% of companies you owe money to need to accept the proposal.

As a formal arrangement, the debtor must adhere to the IVA terms, and failure to maintain monthly payments can result in the IP recommending the start of bankruptcy proceedings. For creditors, once an IVA has been agreed, they are no longer able to take further action or add additional charges to outstanding debts.

The pros of an IVA

1

Job protection:

Unlike bankruptcy, if you enter an IVA, it does not restrict the type of employment that you can take up. Specific industries such as the public sector and the finance industry typically do not permit those who are bankrupt to apply for or undertake employment.

2

No creditor contact:

Once a debtor enters an IVA, lenders can no longer contact you concerning your debts. Emails, phone calls, or letters can be stressful, but in an IVA, the IP deals with all contact regarding your debts.

3

Affordable monthly payments:

An IVA takes time and effort to agree and set up, so it is not in the interest of anyone for the IVA to fail when a debtor cannot keep to the terms. The IP will ensure that a debtor has enough free cash to pay for their day-to-day life outside of the terms of the IVA.

The cons of an IVA

1

Limited bank accounts access:

Bank account restrictions are put in place when a debtor enters an IVA. Limitations include removing credit cards, cheque books and overdraft facilities which leaves bank accounts with few functions.

2

Specific debt exclusions:

Not every type of obligation can come under consideration for inclusion in an IVA. As a rule of thumb, debts secured against an asset (property mortgage, car loan) cannot be included.

3

An IVA annual review:

As part of an IVA arrangement, the debtor commits to a yearly review for every year of the 5-year agreement. During the inspection, an IP can force a debtor to increase payments into the IVA if more income is available.

DCL – Debt Consolidation Loans

Debt consolidation is a solution where multiple loans or credit card balances amalgamate into a single monthly payment. A DCL aims to bring down your overall payments to a more manageable amount.

A DCL requires the debtor to take out a new credit which repays all the existing smaller balances to lenders, including credit card companies.

You can take out a DCL on a secured or unsecured basis; secured means the DCL links to your assets such as a property with a mortgage or a car with finance.

The pros of a DCL

1

Payments:

Your monthly payments will be significantly lower. So less worry and stress.

2

No multiple loans headaches:

There is only one single loan to repay to one loan company.

The cons of a DCL

1

Possibly longer duration in debt:

It may take longer to pay off your outstanding debt as the term extends to make payments lower.

2

A chance of increased payments:

You can end up paying back more overall.

3

You maybe worse of in the long term: 

DCL involves fees and costs, which may make your short-term financial circumstances worst and not better.

DMP – Debt Management plan

A DMP is an arrangement put in place by a debt management provider who will charge an arrangement fee to set up the DMP and typically charge an ongoing fee as part of the agreement.

A DMP looks to lower your monthly repayments and pay back personal loan and credit card debt at a more manageable level. The lender will arrange with creditors to lower repayments, including credit card companies with a new payment schedule.

The pros of a DMP

1

Only a single monthly payment needs making under a DMP:

It goes to the provider who in turn distributes individual payments to your creditors.

2

Affordability of payments:

The provider regularly reviews the DMP to ensure payments remain affordable:

3

Cooperation with creditors:

Once the provider has assessed your budget and outgoings, they will put together an affordable payment schedule to be approved by your creditors.

The cons of a DMP

1

Chance of creditor action later:

A DMP differs from an IVA in that it is not a formal arrangement agreed in a law court. It means your creditors can still take further action against you.

2

No direct shielding from lenders:

A lender can still contact you directly instead of the Insolvency Practitioner as with an IVA.

3

Possibility of more charges etc:

A lender can continue to add both interest and charges to your outstanding debt, unlike in an IVA.

Bankruptcy

If you are no longer able to pay back your credit cards and other debts, bankruptcy is often seen as a solution of the last resort as it can have consequences. Even if you do not want to apply to become bankrupt, a creditor may take the decision out of your hands and apply to a court to make you bankrupt.

The pros of bankruptcy

1

Relief from creditors:

After a bankruptcy order is applied, creditors are no longer able to take further action against you.

2

Less worry overall:

A lender is no longer able to speak to you, which can reduce the amount of stress of not being able to repay debts.

3

Income still available:

You are still able to retain some income to maintain your lifestyle.

The cons of a DMP

1

Reduced privacy:

After you have been made bankrupt, your name will appear on a public register which anyone can access.

2

Fewer employment options:

You will be unable to work or apply for jobs in specific industries such as the public sector.

3

Effect on credit score:

You may find it incredibly difficult to get any credit as your credit rating is adversely affected for six years after a bankruptcy order.

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50k In Debt Summary

A debt of £50,000 is substantial and is likely to be very difficult to keep under control, especially if it is predominantly credit card debt. If you find yourself in such a challenging position and money management techniques are not working, it is vital to get guidance from a debt adviser immediately. An adviser will recommend a suitable solution aligned to your situation and allow you to move forward and get your finances and credit score back in check and move towards being debt free.

Do not delay – Get help and reduce your stress today.

50k In Debt What To Do - Frequently Asked Questions

Is it advisable to pay off all my debt?

To maintain a perfect credit score, there is a case for keeping a small amount of debt. It will allow you to maintain regular payments, which in the eyes of credit report agencies like Experian shows that you are a reliable debtor.

Is 50,000 a lot of debt?

The answer to this question relates typically to your income levels. A standard debt to income measurement is 43% and it means that if you are £50,000 in debt but your monthly payments are 10% of your monthly salary, you can argue that £50,000 is not an excessive amount of borrowing. Conversely, if your £50,000 debt consumes 60% of your income and is credit card debt, it will leave you with less to pay rent and bills and may become unmanageable.

How long would it take to pay off a 50 000 loan?

There is no single answer to this, and it all depends on how much you can afford in repayments. Suppose your debts are out of control and you have decided to take out a debt consolidation loan, to repay multiple debts that run for three years. In this case, the debt consolidation solution is likely to make repayments longer as the aim is to make your monthly repayments more manageable.